Micron Seems to Be Making the Right Moves

Since last year, Micron (NASDAQ:MU) has made a turnaround. The company is a global leader in advanced semiconductor systems. Its portfolio of high performance memory technologies include DRAM, NAND and NOR flash. They are the basis for solid state drives, modules and other system solutions. Micron’s memory solutions enable most of the world’s most innovative computing solutions. Backed by more than 35 years of technology leadership, the company’s products are also utilized in mobile, enterprise storage and automotive applications.

Numbers at a Glance

Micron’s revenues in the first quarter were $4.04 billion. They were 42% higher compared to the fourth quarter of 2013. They were also 120% higher compared to the first quarter of fiscal 2013. On a non-GAAP basis, the net income attributable to Micron’s shareholders was $881 million, compared to a net income of $317 million in the fourth quarter of fiscal 2013. Revenues from sales of DRAM products were 69% higher in the first quarter of 2014 compared to the fourth quarter of 2013. Micron had an operating cash flow of $1.5 billion while capex was $609 million, resulting in a free cash flow of $838 million.

Micron expects a NAND production bit growth in the second quarter. The company also expects to see an increase in gross margins with its NOR sales through a planned transition to 300 millimeter productions for new applications. Micron continues to see strong demand signals from its computing, mobile, networking and embedded customers. Consequently, the company expects a healthy business in DRAM solutions in the second quarter.

New Initiatives

Recently, Micron announced its Fab 7 conversion from DRAM to NAND. Due to this, its overall NAND business surpassed the $1 billion mark for the first time. It also brought an 8% quarter-on-quarter increase. Micron is now in the process of qualifying customers on products that use the Fab 7 output. It is seeing a high percentage of its output sold in component form versus other quarters.

In 2012, Micron announced the purchase of Elpida. It has however completed the transaction. The acquisition should help to boost earnings in the coming quarters. In the first quarter, Micron’s gross margin improved to 32% due to an increase in the volume of products resulting from the acquisition of Elpida.

Head to Head

Micron’s peers in the semiconductor business are Samsung Electronics (SSNLF) and STMicroelectronics (NYSE:STM). However, it has several advantages over its peers. Micron commits substantial resources to come up with cutting edge technologies. One area where Micron excels is in the process technology sector. For instance, its 16nm NAND technology sets industry standards. Micron is also ahead with its Phase Change Memory virtualization.

International expansion

By redefining its strategic joint venture partnerships, Micron has increased its capacity by greater than 90%. After the sale of its Italy and Israeli fab companies and with the closure of its Elpida acquisition, Micron now has sites in Taiwan, Japan and Singapore.

Taiwan at a glance

Micron recently entered a deal with Inotera. The arrangement will give Micron a much larger share of the DRAM market. Inotera is a Taiwanese-based maker of DRAM memory products. Micron finalized an agreement to acquire Rexchip Electronics in July 2013. The development makes Micron the second-largest memory company in the world. The added capacity from the Rexchip DRAM fabrication facility, together with the expertise of the integrating team members, enables Micron to strengthen its memory portfolio.

The Singapore operation

Singapore is Micron’s primary location for its non-volatile technology. Some of its NOR and NAND products are manufactured in the country. On February 28, 2012, Micron and Intel announced that they would expand their NAND Flash memory joint venture relationship in Singapore to increase the flexibility and efficiency of the joint venture.

On a Concluding Note

Micron is still in the relatively early stages of the Elpida Integration activities. And it is going smoothly. In addition, its declining inventory situation coupled with its balanced long-term production will continue to drive market conditions. Overall, Micron’s situation is improving. Therefore, the company could provide returns to investors in the future.

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